Dow Rises 7.15 After Fed Cuts Discount Rate
Market Overview
Highlights of Wednesday’s market activity, compiled from Times staff and wire reports:
* Stocks eked out small gains after the Federal Reserve cut interest rates again. The Dow Jones industrial average rose 7.15 points to 3,038.46.
* Oil prices tumbled as supply worries of recent weeks dissipated.
Stocks
Though the Federal Reserve’s cut in its discount rate clearly cheered traders, the elation was controlled: On the New York Stock Exchange, advancing issues outnumbered declines by only 6 to 5, and volume declined to 166.93 million shares from Tuesday’s 171.95 million.
The Fed dropped the discount rate to an 18-year low of 4.5% from 5%, hoping to breathe life into the economy. Banks responded by quickly lowering their prime lending rates to 7.5% from 8%.
Investors have been expecting the Fed move for weeks, because of the economy’s apparent deterioration. “Now the market’s going to sit and wait to see if it gets any kind of good news” on the economy, predicted analyst Alice Sadlo of McDonald & Co.
Among the market highlights:
* Utility stocks rallied on the interest rate cut. The Dow utility index rose 0.8% versus the Dow industrials’ 0.2%. Among electric utilities, SCEcorp rose 3/8 to 44 1/8, American Electric Power added 1/2 to 30 3/4, and DPL, parent of Dayton Power & Light, jumped 1 3/8 to 23 5/8.
* Brokerage and mutual fund companies also were standouts. Merrill Lynch gained 1 1/2 to 54 3/8, Quick & Reilly rose 1/2 to 21 1/4, and Dreyfus jumped 1 1/8 to 40 3/8.
* California S&Ls;, which should have rallied on prospects for lower interest rates, instead dropped sharply on new concerns about the state economy. CalFed slid 3/8 to 2 5/8, Coast Savings lost 5/8 to 7, and Glenfed sank 5/8 to 5 1/8.
* Investors continued to pick industrial issues, despite doubts about the economy. Goodyear zoomed 1 7/8 to 53 5/8, a 1991 high, after executives apparently gave analysts a bullish outlook. Other industrial gainers included W.R. Grace, up 2 to 40 1/4; Cummins Engine, up 1 1/4 to 48 1/4, and GM, up 5/8 to 34 1/2.
* Toy stocks renewed their rally. Mattel gained 7/8 to 33 3/4, and Hasbro jumped 1 1/2 to 36.
* Southland drug firm ICN Pharmaceuticals leaped 1 3/8 to 16 3/8, and subsidiary Viratek rocketed 3 3/8 to 12 1/4. Speculation has been mounting about the companies’ profit potential.
Overseas, Tokyo stocks extended Tuesday’s losses. The Nikkei average fell 200.66 points to 24,750.20.
In London, the Financial Times 100-share average lost 6.7 points to 2,534.2. In Frankfurt, the DAX average slid 1.90 points to 1,574.22.
In Mexico City, however, the Bolsa index hit a new high of 1,391.10, up 5.8 points. Hong Kong stocks also roared to a new high, the Hang Seng index jumping 27.07 points to 4,173.57.
Currency
The dollar was mixed against other currencies after the Fed lowered the discount rate, which traders had expected.
The morning announcement caused the dollar to slip to 1.630 German marks from 1.633 Tuesday, but it rebounded to 1.637 marks in New York. It dropped to 129.90 Japanese yen from 130.03, however.
A drop in U.S. interest rates undermines the dollar by reducing foreign demand for U.S. securities.
Commodities
Wheat and soybean prices fell sharply on the Chicago Board of Trade as traders gave up hope that the Bush Administration will announce a new Soviet food-aid package. Wheat for delivery in December settled at $3.572 a bushel, down 5.25 cents.
Oil prices fell sharply amid perceptions that supplies are adequate again. Light, sweet crude for December settled at $23.40 a barrel, down 38 cents on the New York Merc.
On New York’s Comex, December gold rose 40 cents to $355.80 an ounce; December silver ended 0.5 cent higher at $4.07.
Market Roundup, D10
